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Submitted by: Steven J. Silver
Steve Silver has worked in the financial services industry for more than 25 years and is the co-founder of Wealth Strategies Group, Inc. in Cordova, TN. With a strong belief that financial planning must be comprehensive and highly personalized to be most effective, WSG focuses on a team approach to financial services. Steve received the specialized designaiton of Certified Divorce Financial Analyst in 1999 and regularly serves as an expert witness in court.
Well, you’ve finally done it. You’ve accepted his proposal... through thick and thin…till death do you part. You’re ready to show the world what a true partnership looks like. Right? Maybe.
Today’s entrepreneurial couples face yet another tribulation— growing a business while growing a marriage. Whether a business has been in the family for generations or one that the young couple has built together, the financial objective should be the same — to build through hard work a particular lifestyle. (All other goals, i.e. tax incentives, helping the family, protecting the environment, etc. are secondary for purposes of this article).
It’s not easy to discuss business protection planning. In fact, it’s a sure fire way to absolutely kill the romance of the moment! But a little bit of discomfort on the front end can prevent a world of hurt down the line. We all know the importance of insurance in case of death, disability, or fire, but what about planning in the event of differences or disagreements.
What if you both agree on the big picture, but have two different approaches? What if you have a silent partner who lent you money but has no expertise in your particular business? What if the business has been in her family for generations, but you’ve been growing it since marriage? Don’t you have a share in it? Do you have a legal say-so? What happens in the event of a divorce?
Or in the case of two siblings running a business, what happens in the event of the death of one partner? Will the remaining sibling be forced to partner with a nonworking spouse who has no expertise or desire for the business?
These issues can certainly be sticky, but certainly not as sticky to discuss on the front end as it will be to sort them out after they present themselves. As with so many other financial planning issues, getting things in writing can avoid a lot of problems down the road and give everyone involved the peace of mind that comes with knowing exactly what part they play in the life of the business.
For example, who breaks the tie in the event of a disagreement on the direction of the business? One partner’s sleeping on the couch for a few nights just won’t make good business sense.
What if “Bob” marries “Jane” and works for his family’s business. As the years go by, Bob works hard growing the business while Jane devotes herself to raising their children. Unfortunately, the marriage ends in divorce, but they agree to continue the successful business. What rights does Jane have in a business whose ownership was legally never transferred to her name? Is she automatically a 50/50 partner? The answer may surprise you. While the business can end up as a marital asset in the event of a divorce, it could be subject to negotiation.
As one client who shares a business with an ex-spouse said, “I was shocked to find out that in Tennessee, marriage doesn’t automatically mean you own part of the business…”
The role of the Certified Financial Planner in business matters extends well beyond the management of retirement assets or availability of proper insurances. A well thought-out plan is vital for every family and just as crucial for every business.
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